Allegis Answers Letter From Pilots With Rebuff

August 15, 1987

Allegis Corp. handed its airline pilots another rebuff Friday, reiterating its objections to the Air Line Pilots Association`s proposal to buy United Airlines, but not mentioning the group`s latest tactical maneuver. On Thursday, the pilots union announced that airline executive William R. Howard has agreed to head the takeover efforts. Should the buyout succeed, Howard would head the employee-owned company.

The union sent a letter to Allegis, formally announcing Howard`s role.

In a brief statement issued early Friday, Allegis acknowledged the letter without mentioning Howard. Allegis merely repeated that it was willing to consider any cash offer, but that the union`s takeover proposal did not meet company objectives.

Howard, 65, resigned unexpected Thursday as chairman of Piedmont Aviation Inc. That airline has agreed to be acquired by USAir Group. If that deal goes through, Howard was slated to be No. 2 to USAir Chairman Edwin I. Colodny.

Ironically, Howard is among finalists in Allegis` search for a successor to Richard Ferris, the former chairman and chief executive officer, sources said.

There was speculation that Howard may have accepted the pilots` offer to spur the Allegis board to select him as chairman.

Ferris` attempt to turn Allegis, formerly UAL Inc., into a total travel company prompted the pilots` $4.5 billion takeover offer in June. Allegis is a holding company for United Airlines, Westin and Hilton hotels and Hertz rental cars.

The pilots offered to buy the airline segment, which is the nation`s largest air carrier, saying it was best run as a separate company, not part of a conglomerate.

Besides enlisting Howard, the union scored another major point in its buyout quest. Rick Dubinsky, chairman of the United pilots union, said Chemical Bank of New York agreed to syndicate the bank financing necessary to complete the purchase.

But the pilots are not home clear. The machinists and flight attendants unions have refused to join forces with the pilots and show no signs of changing their minds.

Allegis reiterated Friday that it would not consider the offer unless all unions that cover United employees went along. Allegis also repeated its previous objection that the pilots` offer, while financially feasible, would leave the company too heavily in debt, which would limit growth potential.

Howard said that, despite objections, Allegis would have to give the pilots` offer serious consideration now that financing has been arranged.

The pilots said their plan calls for spinning off United to employees and Allegis shareholders. Shareholders would receive 20 percent of United`s common stock, with the rest being owned by an employee stock ownership plan.

In addition, Allegis shareholders also would have the right to receive all of the net after-tax proceeds from sale of the business and assets of Westin Hotels. They also would receive a new preferred stock in the airline having a value on a fully distributed basis of $5 a share.